Filing for bankruptcy is a major decision in your life, but it is one that can come with great financial freedom. Consumers often file either a Chapter 7 or a Chapter 13 bankruptcy. While both of these can provide a fresh financial start, Chapter 7 is generally designed to help you get rid of unsecured debts in a shorter period of time.
Many people refer to Chapter 7 as the liquidation bankruptcy because the bankruptcy trustee can liquidate non-exempt assets to pay debts. In many cases, it isn’t worth the effort that would be required, so it’s critical that you work with someone who can help you to learn how your case might be affected by this aspect of filing.
What happens when you file a Chapter 7 bankruptcy?
Once you file the bankruptcy petition in federal court, an automatic stay is issued. This means that creditors can’t try to contact you to collect on the debts. The court will also appoint a bankruptcy trustee to review the case. That individual will look at financial disclosures and will schedule a 341 meeting, which is a meeting of creditors.
During the 341 meeting, you will have to answer questions under oath about the information you provided in the bankruptcy filing. In some cases, creditors won’t attend this meeting.
A typical Chapter 7 bankruptcy may only last a few months, depending on the circumstances. You will have to attend a debtor education course before the case can be discharged. Once all the requirements are met and the case is ready to be discharged, most unsecured debts will be taken care of. Some sets, such as student loans and child support, won’t go away just because you file bankruptcy.
Understanding your rights and responsibilities during a bankruptcy case is critical. Working with someone who can assist throughout the process may help to take some of the stress out of the situation.
